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An Analysis of the Impact of the Commercial Real Estate Concentration Guidance


The 2006 interagency guidance regarding CRE lending did not establish specific CRE lending limits or caps; rather, the guidance set forth supervisory criteria to serve as levels of bank CRE concentration above which they may be identified for further supervisory analysis. According to the guidance, institutions could be subject to further analysis if their

  1. loans for construction, land, and land development (CLD) represent 100 percent or more of the institution's total risk-based capital, or
  2. total non-owner-occupied CRE loans (including CLD loans), as defined, represent 300 percent or more of the institution's total risk-based capital, and further, that the institution's non-owner-occupied CRE loan portfolio has increased by 50 percent or more during the previous 36 months

Owner-occupied CRE loans were not broken out by financial institutions in call report data until 2007; therefore, it was not possible to accurately measure the three-year growth rate of a bank's non-owner-occupied CRE portfolio--and correctly apply the growth component--until late in 2010. Given this data limitation, the historical analysis in this report often uses a measure of the second criteria without this condition applied. This appendix illustrates the correct calculations using the post-2007 call report definitions.

Last update: May 2, 2013

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